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Etisalat Group2Q 2017 Results Presentation
27 July 2017Abu Dhabi, UAE
1. Business Overview
Saleh Abdulla AlabdooliChief Executive OfficerEtisalat Group
Etisalat Group Financial Highlights
3
Revenue impacted by currency depreciation in Egypt and regulatory environment in Morocco
Maintained strong EBITDA margin above 50% level
Net profit impacted by forex losses, impairment charges, share of results from associates
Higher capital expenditure attributed to both domestic and international operations
(1) Financial figures are restated to exclude the impact of discontinued operations
2Q2017 Highlights
AED Million
Revenue
EBITDA
EBITDA Margin
Net profit
Net profit Margin
Capex
Capex/Revenue
Q2 2017 GrowthYoY%
GrowthQoQ%
12,831 -4% +3%
6,599 -3% +4%
51% 0pp +0PP
1,970 -15% -6%
15% -2pp -1pp
2,247 +25% +45%
18% +4pp +5pp
H1 2017 GrowthYoY%
25,289 -3%
12,950 -2%
51% +1pp
4,061 -6%
16% 0pp
3,800 +11%
15% +2pp
4
Q2 2017 Highlights
Financial Highlights
Topline pressure attributed to international operations
— Sustained positive growth in domestic market
Stable EBITDA margin and improved cash flow generation
Interim dividends of 40 fils per share
On track to deliver 2017 financial guidance
Domestic
Operations
Maintained subscribers growth momentum
Revenue growth despite slower economic activities
Sustained Y/Y profitable growth
Invest in network with focus on digital capabilities
International
Operations
Unfavorable exchange rate movements impacted international operations
Maroc Telecom Group facing challenging regulatory environment in
Morocco while improving profitability of international operations
Strong performance in Egypt diluted by currency devaluation
Network transformation program in Pakistan to support data growth
2. Financial Overview
Serkan OkandanChief Financial OfficerEtisalat Group
65%
24%3%
5%2%
UAE MT Egypt Pakistan Others
61%
24% 4%
8%
3%
UAE MT Egypt Pakistan Others
Etisalat Group Financial Highlights
6(1) Financial figures are restated to exclude the impact of discontinued operations
Revenue Breakdown Q2 2017 (AED m) EBITDA Breakdown Q2 2017 (AED m)
UAE +1%
MT Group -5%
Egypt -46%
Pakistan 0%
UAE -1%
MT Group -2%
Egypt -52%
Pakistan -8%
YoY Growth YoY Growth
-4% -3%
12.8bn
6.6bn
(LC +10%)
(LC 0%)
(LC -4%)
(LC -7%)
Represents others
(LC -3%) (LC -1%)
Int’l Operations Financial Highlights Q2 2017
7
Revenue (AED m)/EBITDA (AED m) /EBITDA Margin (%)
YoY Growthin AEDMaroc Telecom Group
Revenue -5%3,051
EBITDA -2%1,598
EBITDA Margin +1pp52%
Etisalat Misr
Pakistan
Revenue 0%1,040
EBITDA -8%344
EBITDA Margin -3pp33%
2Q 2017
YoY Growth in AED2Q 2017
Revenue & EBITDA (AED m) /EBITDA Margin (%) / YoY Growth %
Growth in MAD
0%
-7%
-3pp
YoY growth in
PKR
Revenue -46%568
EBITDA -52%203
EBITDA Margin -4pp36%
YoY Growth in AED
+10%
-4%
-4pp
YoY growth in
EGP
-3%
-1%
+1pp
2Q 2017
5,458
4,7114,853
2,459
2,145 2,195
Q2'16 Q1'17 Q2'17
Revenue EBITDA
45%
46%45%
63%
12%
21%
In Q2’17 consolidated revenue decreased Y/Y by 4% attributed to International operations that was impacted by currency depreciation
Growth in the UAE is attributed to higher fixed and mobile broadband and wholesale revenues
Revenues from international consolidated operations declined by 11%, resulting in 38% contribution to Group revenues, 3 points lower than prior year mainly attributed to currency devaluation
― Revenue growth in MT Group impacted by unfavourable regulatory environment in Morocco
― Revenue growth in Egypt impacted by currency devaluation
― Revenue growth in Pakistan impacted by lower subscriber base and usage
Domestic vs. Int’l
13,326 12,831 104
150 484
0 34
Q2'16 UAE MT Group Egypt Pakistan Others Q2'17
Group Revenue
8
Highlights
Revenue (AED m) and YoY growth (%) Sources of Revenue growth – Q2’17 vs Q2’16 (AED m)
Revenue by Cluster (Q2’17)
International
13,32612,458 12,831
2%
-3% -4%
Q2'16 Q1'17 Q2'17
Revenue YoY growth %
UAE61%
Int'l38%
Others1%
MT Group63%
Egypt12%
Pakistan21%
Others4%
In Q2’17 consolidated EBITDA decreased Y/Y by 1% to AED 6.6 billion mainly due to currency devaluation
EBITDA in the UAE negatively impacted by higher cost of sales.
EBITDA of consolidated international operations decreased Y/Y by 11% due to currency devaluation, resulting in 33% contribution to Group EBITDA
― Negative contribution from Maroc Telecom Group due to competitive environment in Morocco
― Egypt impacted by currency devaluation and inflationary pressure
― Pakistan impacted by higher costs of sales
Group EBITDA
9
6,7996,351 6,599
51% 51% 51%
Q2'16 Q1'17 Q2'17
EBITDA EBITDA Margin
Highlights
EBITDA (AED m) & EBITDA Margin Sources of EBITDA growth – Q2’17 vs Q2’16 (AED m)
EBITDA by Cluster (Q2’17)
Domestic vs. Int’l International
6,799 6,599
43 33 217 29
122
Q2'16 UAE MT Group Egypt Pakistan Others Q2'17
UAE65%
Int'l33%
Others2%
MT Group73%
Egypt9%
Pakistan16%
Others2%
UAE49%
Int'l51%
Others0%
Group CAPEX
10
1,7951,553
2,247
13% 12%18%
Q2'16 Q1'17 Q2'17
CAPEX CAPEX/Revenue
CAPEX (AED m) & CAPEX/Revenue Ratio (%)
In Q2’17 consolidated capex increased Y/Y by 25% resulting in Capex / Revenue ratio of 18%.
Higher capital spend in the UAE with focus on digital capabilities
Capital expenditure in international operations decreased by 5% and contributed 51% of consolidated Group Capex
― Higher capex in MT Group attributed to 4G deployment in Morocco
― Lower capex in Egypt impacted by currency devaluation with focus on 4G network deployment
― Higher capex in Pakistan focused on fixed network modernization
HighlightsCAPEX by Cluster (Q2’17)
Domestic vs. Int’l International
Sources of Capex growth – Q2’17 vs Q2’16 (AED m)
1,795
2,247 489 57
138
18 27
Q2'16 UAE MT Group Egypt Pakistan Others Q2'17
MT Group60%
Egypt13%
Pakistan26%
Others1%
Net cash position (AED m) Jun-16 Jun-17
Operating 4,967 6,407
Investing (3,484) (3,877)
Financing (3,593) (3,117)
Net change in cash (2,109) (587)
Effect of FX rate changes 35 (48)
Reclassified as held for sales (17) 7
Ending cash balance 19,332 23,048
Group Balance Sheet & Cash Flows
11
Balance Sheet (AED m) Dec-16 Jun-17
Cash & bank Balances 23,676 23,048
Total Assets 122,546 124,532
Total Debt 22,279 25,844
Net Cash / (Debt) 1,398 (2,796)
Total Equity 55,915 56,481
Investment Grade Credit Ratings
Strong financial position with relatively stable liquidity level
Insignificant net debt position
Increase in positive operating cashflow
Higher investing cash flow due to higher cash capex spend
Lower financing cash flow due to higher net proceeds from
borrowings
Maintained high credit ratings; Outlook change is triggered
by Moody’s revised outlook of the UAE sovereign rating.
AA-/Stable
Aa3/Stable
Highlights
Debt Profile: Diversified debt portfolio
12
Borrowings by Currency Q2 2017
Debt by Source Q2 2017 (AED m)
Borrowings by Operation Q2 2017 (AED m)
Repayment Schedule Q2 2017 (AED m)
15,570
5,891
2,962
1,421
Group MT Group Egypt Pakistan
15,018
9,861
410 556
Bonds BankBorrowings
VendorFinancing
Others
6,045
4,427
7,697 7,676
1 Yr 2 Yrs 3-5 Yrs Beyond 5 Yrs
Euro39%
USD29%
MAD16%
Others16%
Group Dividends: Proposed dividend for H1 2017 of AED 40 fils per share
13
Interim Dividend Payout RatioInterim Dividends and Dividends Per Share
HighlightsInterim Dividend & Earnings Per Share (AED)
Etisalat’s Board approved interim dividends of 40 fils per
share to be distributed to the shareholders registered in
the shareholders’ register on 6 August 2017
(1) Represents diluted earnings per share
H1'13 H1'14 H1'15 H1'16 H1'17
DPS 0.35 0.35 0.40 0.40 0.40
EPS (1) 0.44 0.52 0.43 0.50 0.47
2.77 2.77
3.48 3.48 3.48
0.35 0.35 0.40 0.40 0.40
2013 2014 2015 2016 2017
Interim Dividends (AED bn) DPS
80.1%
67.2%
93.7%
80.6%85.7%
H1'13 H1'14 H1'15 H1'16 H1'17
Payout Raio
14
Country by Country Financial Review
15
EBITDA (AED m) / EBITDA %Revenue (AED m) / YoY Growth (%)
CAPEX (AED m) & CAPEX/Revenue Ratio (%)Net Profit (AED m) / Profit Margin (%)
8%%
7,718 7,624 7,823
3%5%
1%
Q2'16 Q1'17 Q2'17
Revenue YoY growth %
2,057 2,0312,182
27% 27% 28%
Q2'16 Q1'17 Q2'17
Net Profit Margin %
4,336 4,136 4,293
56% 54% 55%
Q2'16 Q1'17 Q2'17
EBITDA EBITDA %
605 588
1,094
8% 8%14%
Q2'16 Q1'17 Q2'17
Capex Capex/Revenue
UAE: Maintained growth momentum with improved profitability
1.90 1.99 2.03
8.32 8.60 8.49
112105 104
Q2'16 Q1'17 Q2'17
Postpaid Prepaid Blended ARPU
UAE: Revenue Breakdown and Key KPIs
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(1) Mobile revenues includes mobile voice, data, rental, outbound roaming, visitor roaming, VAS, and Digital services (2) Fixed revenues includes fixed voice, data, rental, VAS, internet and TV services (3) Others Revenues includes ICT, Managed Services, Wholesale (local and int’l interconnection, transit and others), Handsets and Miscellaneous (4) Mobile subscribers represents active subscriber who has made or received a voice or video call in the preceding 90 days, or has sent an SMS or MMS during that period(5) Mobile ARPU (“Average Revenue Per User”) calculated as total mobile revenue divided by the average mobile subscribers.(6) Fixed broadband subscriber numbers calculated as total of residential DSL (Al-Shamil), corporate DSL (Business One) and E-Life subscribers.(7) ARPL (“Average Revenue Per Line”) calculated as fixed line revenues divided by the average fixed subscribers.
Mobile Revenues (1) (AED m)
Fixed Broadband (6) Subs (m) & ARPU (7) (AED)Mobile Subs(4) (m) & ARPU(5) (AED)
Fixed Revenues (2) (AED m) Other Revenues (3) (AED m)
1,396 1,318
1,560
Q2'16 Q1'17 Q2'17
3,607 3,531 3,545
Q2'16 Q1'17 Q2'17
2,715 2,775 2,717
Q2'16 Q1'17 Q2'17
0.21 0.17 0.17
0.18 0.20 0.21
0.70 0.74 0.74
500 507 502
Q2'16 Q1'17 Q2'17
1P 2P 3P ARPU
3,201
2,967 3,051
51% 52% 52%
Q2'16 Q1'17 Q2'17
Revenue EBITDA %
Morocco65%
Int'l35%
Morocco55%
Int'l42%
Others-3%
Maroc Telecom: Challenging regulatory and competitive environmentMorocco, Benin, Burkina Faso, CAR, CDI, Gabon, Mali, Mauritania, Niger and Togo
17
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
53.0 54.5 55.0
Q2'16 Q1'17 Q2'17
Domestic vs. Int’l
Revenue Breakdown Q2’17
Int’l
638
432
695
20%15% 23%
Q2'16 Q1'17 Q2'17
CAPEX CAPEX/Revenue
Domestic vs. Int’l
Capex Breakdown Q2’17
Int’l
Historical subsidiaries
61%
New subsidiaries
39%
Historical subsidiaries
56%
New subsidiaries
44%
280
229
143
27%42%
25%
Q2'16 Q1'17 Q2'17
CAPEX CAPEX/Revenue
Egypt: Performance masked by currency devaluation
18
Total Subscribers (1) (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
1,052
548 568
40%36% 36%
Q2'16 Q1'17 Q2'17
Revenue EBITDA %
Stable market share with better subscribers mix
Revenue growth Y/Y impacted by steep currency devaluation
― Maintained revenue growth Y/Y in local currency
— Revenue growth across all segments with major contribution from data revenues
EBITDA margin Y/Y is lower as cost structure impacted by inflationary pressure
Capex/Revenue marginally down Y/Y with spend focusing on 4G deployment and network expansion
Highlights
96 98 100
24% 24% 24%
Q2'16 Q1'17 Q2'17
Subscribers Market Share
(1) Subscribers and market share data as per statistic published by the Ministry of Information and Technology
USD / EGP FX Rate (EGP)
7.6 8.9
18.1
7.68.9
18.1
Q2'15 Q2'16 Q2'17
Average EoP
23.6
21.7 21.5
Q2'16 Q1'17 Q2'17
1,039 1,010 1,040
36% 35% 33%
Q2'16 Q1'17 Q2'17
Revenue EBITDA %
286
216
303
27%21%
29%
Q2'16 Q1'17 Q2'17
CAPEX CAPEX/Revenue
Pakistan: Fixed network modernisation to support data growth
19
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
HighlightsRevenue Breakdown Q2’17
Subscriber loss attributed to focus shift to value share and fixed to mobile substitution.
Revenue is flat Y/Y impacted by lower subscriber base and lower usage
— 3% Q/Q revenue growth
EBITDA margin impacted by higher regulatory and terminations charges in addition to network and marketing costs
Capex spending focused on fixed network modernization
PTCL59%
Ufone41%
Nigeria: Etisalat exited from Nigeria market
20
Subsequent to default by EMTS(1) under its existing Naira and USD facilities with a syndicate of Nigerian banks, EMTS and its Lenders engaged, for a number of months, in discussions on a debt restructuring plan. However, such restructuring plan was not agreed between EMTS and its Lenders.
As a result, on June 9 2017, EMTS received a Default and Security Enforcement Notice from its Lenders triggering a requirement pursuant to the Share Charge under the facilities, for EMTS Holding BV(2) to transfer 100% of its shares in EMTS to United Capital Trustees Limited(3) by June 15 2017, such deadline was later extended to June 23, 2017.
On June 22 2017, Board members representing Etisalat in EMTS’ Board resigned.
On June 30 2017, Etisalat Group terminated the management and technical support related agreements with EMTS, while the termination of the agreements governing the use of Etisalat’s brand (including its trademarks) was deferred to July 21, 2017. In the interim period, Etisalat and EMTS engaged in negotiations to put in place new agreements for technical services, strategic procurement support and the ongoing use of Etisalat Group’s brand (including related IP rights).
On July 18 2017, EMTS and the EMTS Lenders decided not to proceed with negotiations for the above mentioned interim agreements and elected to use a new brand. Accordingly, the rights granted to EMTS to use Etisalat’s brand (and related IP rights) terminated as of 21 July 2017, and from that date the use of the brand will be phased out.
For the transfer of EMTS shares, United Capital Trustee Limited has yet to complete the legal process in Nigeria.
In consequence, Etisalat’s investment in EMTS Holding BV considered as discontinued operation as at June 30 2017.
Etisalat has fully written-off the investment value of EMTS in its financial statements with no further exposure.
(1) EMTS is established in Nigeria and 100% owned by EMTS Holding BV(2) EMTS BV is established in the Netherlands through which Etisalat Group holds its indirect interest in EMTS(3) United Capital Trustees Limited is the “Security Trustee” of the EMTS Lenders
21
2017 Actual Against Guidance: On track for full year guidance
Revenue Growth %
EBITDA Margin%
CAPEX / Revenue %
Slightly Lower
around 50%
Financial KPI
Guidance 2017
In AED
1% – 2%
18% - 19%
Guidance 2017Constant
Currencies (1)
-3%
15%
ActualH1 2017In AED
+2%
Actual H1 2017Constant
Currencies (1)
51%
(1) Constant currency: Financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for thecomparable prior-year period. In order to compute our constant currency results, we multiple or divide, as appropriate, our current AED results by the current year monthly average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior year monthly average foreign exchange rates.
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Etisalat Group Investor RelationsEmail: [email protected]
Website: www.etisalat.com/en/ir/index.jspr